Moving from a dynamic cohort microsimulation model
to a dynamic population microsimulation model:
an incremental approach for a UK model of long-term care
charging (CARESIM)
ESRC Microsimulation Seminar
Leeds, 2nd July 2009
Ruth Hancock and Marcello Morciano
Health Economics Group, Faculty of Health, University of East Anglia, UK
Chris Curry
Pensions Policy Institute, UK
Raphael Wittenberg and Linda Pickard
Personal Social Services Research Unit, London School of Economics, UK
1
Background
In the UK
• Long term care (LTC) system is under debate
• Pension reforms may affect ability of future pensioners to pay for
care
• Population ageing affects public expenditure on LTC and pensions
• LTC and pension reforms can have significant distributive effects
• MAP2030 is using simulation models of LTC finance and charging,
disability, kinship etc. to address these issues
• This presentation describes:
– The incremental approach used to ‘refresh’ CARESIM
– Preliminary outputs
– Limitations and next steps
2
CARESIM:
a microsim. model of LTC charges for older people in UK
• Uses (a pooling of) 3 representative cross samples of
the UK population (Family Resources Survey)
• In the base year, simulates income tax liabilities for the
whole sample; means-tested benefits and care charges
for 65+ [static tax/benefit model]
• ‘Ages’ the sub-sample of people aged 65+, to simulate
taxes and benefits for older people and their liability for
care charges in future years [dynamic cohort
microsimulation model]
• Weights applied to adjust sample of older population to
represent older population in receipt of care services.
Weights are provided by PSSRU macro model of long
term care demand and finance.
3
Limitations of CARESIM if sample not
refreshed
• after 20 years from the base year, simulations valid for
only those aged 85+
• beyond base year, not possible to model any tax
revenue raising options which would apply to under 65s
• not possible to include social security benefits for carers
of older people if they are under 65
4
The proposed incremental approach
Aims to:
•
•
•
•
simulate care charges for all those who will be aged 65
and over in up to 20 years from the base year
extend the time horizon of the care charging simulations
model the availability of informal carers of sample
members aged 65+ in the output year and their
entitlements to adult carers’ social security benefits
simulate income tax liabilities for the whole adult
population for the same time horizon
5
Adding new cohort of people now aged 4564
age
100 +
95
90
85
80
75
70
65
60
55
50
45
40
35
30
25
20
15
10
5
0
Need to simulate
pensions & retirement
2007
2012
2017
NEW sample members
2027
2022
2032
sample members
ACTUAL
year
simulation
6
2037
2042
2047
UK Pensions System
1. Public: provides basic provision
–
–
–
the Basic State Pension (BSP);
Means testing benefits: Pension Credit; Housing Benefit; Council Tax Benefit;
Disability and other minor benefits.
2. Public: earnings-related pensions Graduated Retirement Benefit, State
Earnings Related Pension Scheme, Second State Pension.
3. Private: voluntary arrangements not directly funded by the State
–
–
Individual arrangements – defined contribution
Employer-sponsored pension schemes, including occupational
(employers’) pension schemes – defined benefit and defined
contribution
Recent reforms:
•
•
State pensions: Earnings-link the level of Basic State Pension (BSP), limit
the spread of means testing, raise state pension age
Private pensions: Auto-enrol most employees into saving for a private
pension, Compel employers to contribute (if the employee does not opt-out),
introduce a national system of Personal Accounts, to operate alongside
existing provision
7
UK Long-Term Care Policy
• LTC funded through mix of state and private resources
• State support is subject to means tests which vary
between Scotland, England and Wales and are different
for residential and care at home
• Royal Commission on LTC recommended that nursing &
personal care should be available without a means test
• Free nursing care implemented throughout the UK but
free personal care only in Scotland
• Means tests continue to be a source of discontent
• Wanless review of social care suggested a new
partnership model of paying for LTC
• Green Paper expected in June July
8
The structure of the new routine
2007
Past
Future
Base
Sample
Yes
Individual i has worked
as FT/PT or woman has
had children?
DE-AGEING
No
Retrospective construction of
working careers; accumulation
of credits for state pensions
Yes
Individual i has
reached SPA ?
No
FUTURE
Prospective simulation of
working careers and
accumulation of pension rights
Simulate Pension Incomes
9
Share of unemployed/inactive by age and cohort of
birth: male and female
[2008-2027]
Fem ale
Male
0.7
0.7
0.6
0.6
0.5
0.5
0.4
0.4
0.3
0.3
0.2
0.2
0.1
0.1
0
0
46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64
46 47 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64
age
age
before 1950
1951 - 1955
before 1950
1951 - 1955
1956 - 1960
after 1961
1956 - 1960
after 1961
10
Pension outcomes
Average amount of public and private pension(s) for the
new retirees by year of retirement and gender
Female
Male
400
Public
350
350
300
300
250
200
150
SERPS/S2P
100
50
0
2005
BSP
2007
2009
2011
Public
Private
£ per week, 2007 prices
£ per week, 2007 prices
400
2013
2015
2017
2019
2021
2023
2025
250
200
150
100
SERPS/S2P
50
BSP
0
2005
2027
Private
2007
2009
2011
year of retirement
2013
2015
2017
2019
year of retirement
Note: Analysis based on the flow of new pensioners in receipt of an amount >= £10 pw
We do not consider means-testing benefits
Reduction of gender gap, mainly due to the role of public pension
11
2021
2023
2025
2027
Consequences for distributional analyses of
reforms to care charging
Two aspects considered here:
• Comparing 2007 and 2027, for 65+ rather than 85+
• Classifying by 65+ income distribution rather than age
group specific income distribution
Two reforms:
• ‘free personal care’ – flat rate non means-tested subsidy
to care in a care home, care at home free of charge
• Housing wealth disregarded in assessing contribution to
care component of care home fee
12
85+
or
Distribution of relative total gains: care home residents and home care recipients by age
group specific income quintile , aged 85+
280
260
260
240
240
220
220
200
200
175
180
172
Relative gain (overall gain=100)
Relative gain (overall gain=100)
Distribution of relative total gains: care home residents and home care recipients
by age group specifc income quintile, aged 65+
280
180
158
160
146
146
140
128
120
110
106
65+ ?
163
147
143
140
134
130
120
109
105
86
83
69
71
103
98
100
89
80
102
101
99 100
100
162
160
81
80
74
69
60
67
60
53
45
77
72
53
40
41
40
40
33
20
20
9
0
0
Q1 (lowest)
Q2
Q3
Q4
Q1 (lowest)
Q5 (highest)
Q2
Q3
Q4
Q5 (highest)
Age group specific income quintile
Age group specific income quintile
Free personal care, 2007
Housing Disregard, 2007
Free personal care, 2007
Housing Disregard, 2007
Free personal care 2027
Housing disregard, 2027
Free personal care, 2027
Housing disregard, 2027
13
Age specific
or
income distribution ?
Distribution of relative total gains: care home residents and home care recipients
by age group specifc income quintile, aged 65+
65+
Distribution of relative total gains: care home residents and home care recipients
by 65+ income quintile, aged 65+
280
280
260
260
240
240
220
220
200
200
180
163
162
Relative gain (overall gain=100)
Relative gain (overall gain=100)
180
160
147
143
140
134
130
120
109
102
101
103
150
148
140
132
129
124
120
109
99
98
100
171
157
160
100
94
93
89
86
83
81
80
69
77
80
72
72
67
61
60
60
53
54
48
42
40
40
40
40
33
20
20
7
0
0
Q1 (lowest)
Q2
Q3
Q4
Q1 (lowest)
Q5 (highest)
Housing Disregard, 2007
Free personal care, 2027
Housing disregard, 2027
Q3
Q4
Q5 (highest)
Income quinitle, 65+ population
Age group specific income quintile
Free personal care, 2007
Q2
Free personal care, 2007
Free personal care, 2027
14
Housing Disregard, 2007
Housing disregard, 2027
Conclusions
• Restricting the analysis of those 85+ is not as limiting as it may seem at
first
Limitations
• Much more validation and sensitivity analysis needed
• Range of events simulated for the new cohort needs to be extended
(e.g. divorce and (re)marriage decisions)
… and next steps
• Extending time horizon of the analysis (up to 2050)
• Eventually add cohorts under age of 45 so that ultimately simulate
carers benefits for under 65 carers of people aged 65+ and
ultimately simulating income tax liabilities for the whole adult
population for the same time horizon
15